How can you “Roam like at Home”: capping wholesale roaming charges

Abolishing roaming charges for intra-EU travellers is a cause that all EU citizens can identify with since it offers tangible, forthright benefits, but achieving it involved significant underlying difficulties. With the Council adopting a Regulation on the wholesale roaming prices at the end of April, it looks as though the last obstacle has been removed and the project is on its way to become reality.

In order to allow citizens to “Roam like at Home” (RLAH), the most important prerequisite is an agreement on the so-called “wholesale prices” of texts, calls and data, which are the prices operators charge each other for the services their customers use while abroad. For example, if German customers go on vacation to Italy, their German provider will have to pay the Italian operator for the services the latter provided. If the wholesale prices are high and companies are not allowed to ask for surcharges from their customers, they will have to raise their domestic prices to compensate for the losses. Maximising the prices one operator can ask from another for calls, texts, or data helps to reduce uncertainty and protect domestic consumers from having to pay for free roaming through increased domestic prices.

On 25 April, the General Affairs Council adopted the informal agreement reached with the Parliament on the proposal for a Regulation maximising wholesale roaming charges between operators. This means that, from 15 June, an operator will not be able to ask for more than €0.032 per minute for phone calls, €0.01 per SMS and €7.7 per gigabyte of data, with the latter decreasing gradually to 2.5€/GB by 2022. Since, in the majority of European countries, costs for such services are above these wholesale prices, they enable providers to be able to pay for their consumers’ consumption abroad without making a loss, thus allowing for free roaming across the EU Member States.

Limiting wholesale prices

Costs have been decreasing ever since the first limit on wholesale roaming prices for phone calls was set in 2007, to which text and data transfer caps were added in 2009 (see graph below). The steep trajectory of the reductions later led the Commission to propose June 15 2017 as the day retail roaming surcharges would be completely abolished.

Wholesale Roaming Charges - graph1

The Regulation recently adopted by the Council limits the prices one operator can charge another for providing services to their customers. According to the new rules, the roaming price cap for one minute of phone call would be €0.032, a text could cost a maximum of €0.01, while for data, operators could charge their foreign counterparts at most €7.7 per gigabyte. To account for foreseeable reductions in prices, the price for data would be reduced even further in the coming years, as per the graph below.

Wholesale Roaming Charges - graph2

These prices were set in such a way as to be lower than the large majority of the deals offered by European operators, but higher than the costs of the provision of the service, in order to make roaming profitable for both the “home” and the “foreign” providers. This way the fees customers pay to their home operators can cover the services the foreign operator provides, and the fees the home operator pays to the foreign operator can cover the latter’s costs of providing the service. The Commission also foresees a significant increase in the overall usage of roaming, which they believe could largely compensate for the reduced profit margins.

Ensuring fair use and avoiding higher domestic costs

During the negotiations, the most frequently raised issue was the question of fair use. Stakeholders were worried that users would exploit the new rules by buying packages from providers operating in Member States other than those where they work or live. To avoid this, the Commission adopted an Implementing Regulation last December to ensure that users either reside in or have stable links to the Member State of their operator. To this end, operators are allowed to ask their consumers to provide proof of residence or work, while they can also apply reasonable and proportionate control mechanisms based on objective indicators if they suspect a consumer’s roaming to be abusive. The two objective indicators for abuse are, on the one hand, if roaming consumption prevails over domestic consumption, and on the other hand, if foreign presence prevails over domestic presence. In these cases, operators would be allowed to apply roaming surcharges.

Another worry was that, even with the maximised charges, in some cases operators could still end up losing money on roaming, potentially leading to domestic price increases. To avoid this, the Commission has capped those packages which include data plans that are either unlimited or significantly cheaper than the wholesale price. In those cases, data consumption is limited to twice the amount of data the operator can buy at wholesale price (see graph below).

Wholesale Roaming Charges - graph3

At the same time, the new rules also contain safeguards against abusive operators who would use the low wholesale prices to build their business model on offering packages mainly for “permanent roaming” purposes. To this end, operators are allowed to include in their reference offers (for the use of their network by other operators) conditions to prevent such abuses, for example by asking the other operator to provide aggregated roaming traffic information. If they have reasonable grounds to believe that the other provider is engaged in abusive or anomalous use of the low wholesale prices, they can, as a last resort, even provide for the possibility of terminating the wholesale roaming agreement, albeit only with the explicit consent of the national regulatory authority.

If, even with these restrictions, operators found that they were experiencing retail roaming losses (equivalent to at least 3% of their mobile services margin), they would be able to ask their national regulator for an exemption under the so-called “exceptional and temporary derogation system”, whereby they could apply small surcharges to make up for their loss and to avoid having to raise domestic prices.

Seaside worries

In the Council, Greece, Spain, Cyprus and Croatia voted against the proposal, voicing their fear that during high season the traffic generated by visiting tourists would overwhelm their regional networks, requiring infrastructure investments that would ultimately be paid for by domestic users. They argued that, combined with the lowered wholesale prices this would make tourism – a previously lucrative market – unprofitable or even harmful for telecommunications companies.

The Commission took notice of the worries of these Member States, but voiced its belief that the aforementioned safeguards will be enough to ensure that domestic prices stay at their current level. Nevertheless, the effects of the Regulation will be closely monitored and the Commission will have to report every two years whether the rules are working properly or if there is a need for modified caps. The first biennial report will be published by 15 December 2019, with an interim one provided one year earlier.

Overall, the Regulation represents the crucial last step in clearing the path for a smooth transition to an EU without roaming charges. “Roam like at Home” is one of the flagship projects of the EU in terms of public relations, thus it is crucial that no technical or practical complications hamper its implementation. It is hoped that the caps on the wholesale roaming prices represent a reasonable compromise in this regard.

Next steps

Since the Council adopted the informal agreement reached with the Parliament, the Regulation is now expected to be published in the EU Official Journal in the coming weeks and will enter into force three days following its publication.  The Commission will monitor the efficiency of the rules and will submit an interim report, along with potential proposals for amendments, by the end of 2018. Afterwards, and starting from 15 December 2019, it will submit biennial reports to the Parliament and the Council, potentially accompanied with a proposal to alter the now established wholesale roaming caps.

Retail roaming surcharges will be abolished in the 28 Member States starting from 15 June this year.

Additional Facts

Official Title: Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 531/2012 as regards rules for wholesale roaming markets

Proposal date: 15 June 2016

Legal Basis: Art. 19 of Regulation (EU) No 531/2012

Procedure: Ordinary Legislative Procedure